Lululemon Gets Lift From Men’s Business, Product Investments –Update

Lululemon Athletica Inc., bucking a sales slowdown that has sent shock waves through the sector, raised annual financial targets following a strong performance in the latest quarter.

The Vancouver athletic-apparel company said sales were strong across several categories and that it saw room for further growth, including in outerwear, a category that would also boost profit margin.

Among the highlights in the most recent quarter, Chief Executive Laurent Potdevin said in a conference call, was the men’s business, which Lululemon expects to account for more than $1 billion in annual sales by 2020.

“Men’s is still one of our best-kept secrets,” Mr. Potdevin said.

Lululemon, which targets $4 billion in sales by 2020, Thursday said it now expects sales in the current fiscal year to reach at least $2.55 billion.

Shares, down 12% this year, rose 5.8% to $60.89 in after-hours trading.

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In late March, when Lululemon offered a first look at what was then expected to be a weak year, company executives blamed disappointing sales early in the year on spring offerings that weren’t bold enough. By then, company officials said they were adding more colorful clothes and were encouraged by a sales uptick.

In addition to rolling out products beyond its signature yoga clothing, Lululemon has said it is focusing on its digital and international businesses including China, a key expansion market where it is seeing strong momentum.

Same-store sales, a closely watched figure that strips the impact from recent store openings or closings, rose 7% in the latest period, ahead of analysts’ projected 4.2% increase, according to FactSet.

Revenue rose 13% to $581 million, which also came in ahead of expectations.

Overall, Lululemon’s second-quarter profit fell 9% from the year-ago period to $48.7 million, or 36 cents a share. Excluding costs tied to the restructuring of girls brand ivivva, profit improved to 39 cents a share.

Mr. Potdevin said during the conference call that Lululemon’s quarterly performance was helped in part by “community activations,” including connecting with consumers through retail store events, live-streamed yoga classes, and sponsorships of running events.

Mr. Potdevin also said that executive vice presidents Gina Warren and Scott “Duke” Stump were leaving the company. The departures are notable as Ms. Warren, whom Mr. Potdevin said was leaving for personal reasons, led Lululemon’s culture and talent departments. Mr. Stump, meanwhile, had been charged with reimagining the company’s brand and building its community.

“While these changes are important, we have a strong and expanding team driving this business as it continues to grow and evolve,” Mr. Potdevin said, adding: “The brand is stronger than any of us individually.”